Nordstrom, Inc. operates department stores in numerous states. Selected financia

Question

Nordstrom, Inc. operates department stores in numerous states. Selected financial statement data for the year ending January 30, 2010, are shown below.

Nordstrom, Inc.
Balance Sheet (partial) (in millions)
End-of-Year
Beginning-of-Year Cash and cash equivalents
$ 795
$ 72 Accounts receivable (net)
2,035
1,942 Merchandise inventory
898
900 Prepaid expenses
88
93 Other current assets
238
210 Total current assets
$4,054
$3,217 Total current liabilities
$2,014
$1,601 Nordstrom, Inc. operates department stores in numerous states. Selected financial statement data for the year ending January 30, 2010, are shown below. For the year, net sales were $8,258 and cost of goods sold was $5,328 (in millions). Compute the four liquidity ratios at the end of the year. (Round all answers to 1 decimal place, e.g. 1.6 .)

Explanation / Answer

Current ratio=current asset/current liability
= 4054/2014 = 2.0 :1

acid test ratio=(current asset-invntry-prepaid exp.)/current liability
= 3068/2014 = 1.5 :1

receivable turnover ratio= sales/accounts receivable
= 8258/2035= 4.1 times

Inventory turnover= COGS/Avg. inventory
Avg. inventory=(898+900)/2=899
Ratio= 5328/899 = 5.9 times

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